Bombay High Court
Magna Graphtcs India Ltd vs The Commissioner Of Income Tax Tds I ... on 8 May, 2026
2026:BHC-AS:22707
SPG / SAGAR WP-5088-2025.doc
S
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO. 5088 OF 2025
WITH
INTERIM APPLICATION (STAMP) NO. 25024 OF 2025
1. Magna Graphics (India) Ltd.
A company having its address
formerly at:
101 C&D, Govt. Industrial Estate,
Kandivali (W),
Mumbai. 400067
and presently having its correspondence
address at:
36, Millenium Tower,
Breach Candy, Mumbai-400026.
2. Mario Ronald Ferreira
Age : 65 years,
R/at: 402 Ruby Terrace, Dadabhai Cross
Road No.3, Vile Parle West,
Mumbai. 400056
3. Proneeta Vikram Hira
Age : 40 years,
R/at: 38, Millenium Tower,
Breach Candy, Mumbai-400026. ... Petitioners
V/s.
1. The commissioner of Income Tax,
(TDS)-1, Mumbai
Room No. 401, Cumballa Hill,
MTNL Building, Pedder Road,
Mumbai. 400026
2. Income Tax Officer,
(TDS)-1(3)(4), Mumbai
Cumballa Hill, MTNL Building,
Pedder Road, Mumbai. 400026
3. Late Nari Motiram Hira
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SPG / SAGAR WP-5088-2025.doc
Previously residing prior to his demise
at 37, Millenium Tower,
Breach Candy, Mumbai-400026.
4. State of Maharashtra
Through the Office of the Public Prosecutor,
High Court of Judicature at Bombay, Fort,
Mumbai-400001.
5. Union of India
Through the Secretary (Revenue),
Department of Revenue,
Ministry of Finance,
Room No. 128-1,
North Block New Delhi-110001 ... Respondents
______________________
Mr. Roshan Deshpande a/w Mr. Vihit Shah, Ms. Dhanshita Ravi i/b Ms. Alisha
Pinto for the Petitioners.
Mr. Y. S. Bhate for Respondent No.1, 2 and 5.
Mr. Y. M. Nakhwa, A.P.P. for Respondent No.4-State.
______________________
CORAM : RANJITSINHA RAJA BHONSALE, J.
RESERVED ON : 11th FEBRUARY 2026
PRONOUNCED ON : 8th MAY 2026
JUDGMENT :-
1) By the present Petition, the Petitioners seek directions under Section 482 of the Code of Criminal Procedure, 1973, (Section 528 of the Bharatiya Nagarik Suraksha Sanhita 2023), inter alia for quashing and setting aside the impugned Order dated 4th January 2019 passed by the learned Additional Chief Metropolitan Magistrate 38th Court at Ballard Pier and the criminal proceedings in Private Warrant case No. 1688 of 2018 filed by the Respondent No.2 against the Petitioners. The Petitioners also seek to challenge 2/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc the impugned sanction Order dated 26 th March 2018 issued by the Respondent No.1 for initiating prosecution under Section 276B read with Section 278B of the Income Tax Act. The principle basis for claiming relief is that, the Tax Deducted at Source (TDS), though belated, has been paid by the Petitioner, along with interest, prior to the Show Cause Notice being issued by Respondent No.1.
2) The relevant facts are as under:-
2.1) The Petitioner No.1 was engaged in the business of operating printing press. Since the year 2017-2018, Petitioner No. 1 has not undertaken any active business operations.
2.2) In the year 2012 and 2013, Petitioner No.1 had deducted tax at source for a total amount of Rs 17,15,402/-. On account of the lapses of certain erstwhile employees of the Petitioner No.1, tax related compliance including deposit of TDS could not be done within the stipulated time. 2.3) On realizing that, certain TDS remained to be deposited, for transactions undertaken in the financial year 2012-2013, the Petitioners paid the entire TDS along with the applicable interest under the Act. That, the said TDS and the interest was paid on 25th September 2013, even before any action was initiated by the Respondent- Income Tax Authorities. 2.4) On 31st January 2017, Respondent No.1 issued Show Cause Notice, wherein it proposed to initiate action on account of delay in deposit of TDS, for the transactions pertaining to the financial year 2012-2013. The 3/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc Show Cause Notice dated 31st January 2017 was issued, after about 40 months from the payment of the delayed TDS along with interest. 2.5) At the hearing before the authorities, it was contended on behalf of the Petitioners that, the delay was unintentional and on account of the lapse of certain erstwhile employees. That, the TDS liability has now been discharged along with applicable delayed interest. That, the payment was done even before the Show Cause Notice was issued.
2.6) Respondent No.1 by Order dated 26 th March 2018 accorded sanction under Section 279(1) of the Income Tax Act for prosecution. On 19 th April 2018, Respondent No.2 filed a complaint against the Petitioners and the Respondent No.3. Learned Additional Chief Metropolitan Magistrate, 38 th Court, Ballard Pier, Mumbai vide Order dated 4th January 2019, issued process, against the Petitioners and the Respondent No.3. That, Respondent No.3 expired on 23rd August 2024.
2.7) That, Petitioners came to know about the present proceedings only in August 2025, when Petitioner No.3 had applied for renewal of his passport. That, on 16th September 2025, the Petitioner applied and received certified copies of the complaint and the impugned Order and thereafter filed a present Petition.
3) Heard Mr. Rohan Deshpande for the Petitioners, Mr. Y. M. Nakhwa, A.P.P for Respondent No.4-State and Mr. Bhate for Respondent Nos.1, 2 and 5. Perused the entire record.
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SPG / SAGAR WP-5088-2025.doc 4) Learned Advocate for the Petitioner submitted that, 4.1) That, the TDS amount though deducted remained to be paid by
the erstwhile employees of the Petitioner No.1. That, though delayed, the Petitioners have deposited the entire TDS amount due along with applicable interest for the delayed payment. The non-payment occurred due to the lapse of the erstwhile employees who were responsible for undertaking tax compliance.
4.2) That, before the Show Cause Notice was issued, the entire TDS liability was discharged by the petitioners in full and therefore Section 276B of the Income Tax Act would not be attracted. The Learned Advocate appearing for the Petitioners would relied upon the following judgments i.e.
a) Hemant Mahipatray Shah v. Anand Upadhya [2024]
b) Sree Mataliks Ltd. v. Union of India [2024]
c) Dev Multicom (P.) Ltd. V State of Jharkhand [2022] . 4.3) That, the Show Cause Notice and the impugned sanction order implicating Petitioner Nos. 2 and 3 and Respondent No.3 (since deceased) are only based on the facts that, they were directors of Petitioner No.1. That, there has been no enquiry or specific allegations made, attributing the delay in payment of TDS to them. That, nobody has been identified as Principal Officer responsible to the day to day affairs, tax affairs and the function of the Petitioner No.1. That, Respondent Nos.1 and 2, have failed to substantiate or determine the alleged roles of the individuals in commission of the offence 5/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc under Section 276B in order to make them liable under Section 278B of the Income Tax Act.
5) Learned Advocate appearing for Respondent Nos. 1, 2 and 5, in reply, while opposing the grant of any relief to the Petitioners, submitted that:- 5.1) The explanation for the delay is an afterthought and unsupported by contemporaneous evidence.
5.2) That, the obligation to deposit TDS within the stipulated time is a strict statutory liability and that on the ground of the internal administrative lapse one cannot get absolved from the criminal liability. That, there is a substantial delay in depositing the TDS which ranges from a period of 2 months to 17 months.
5.3) That, the Show Cause Notice dated 31 st January 2017, was issued to the Principal Officer of the company and its directors as per Section 279(1) of the Act after due verification of record and on the basis of the proposal received from the Assessing Officer (TDS). It was issued after considering the position and responsibilities of the Petitioner and Respondent No. 3 in the company at the relevant time.
5.4) That, after the Show Cause Notices were issued, opportunity of hearing was granted to the Petitioners, where the Competent Authority found the explanation to be unsatisfactory and not constituting a "reasonable cause"
within the meaning of Section 278A of the Income Tax Act 1961.
5.5) That, after due compliance and application of mind to the 6/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc
material on record, the sanction was issued under Section 279(1) of the Income Tax Act. That, the Petitioner has not made out any case for interference.
6) I have perused the record and the Affidavits filed by the Respondent Nos. 1, 2 and 5. Perusal of the record indicates that, it is an admitted fact that, there was a delay in payment of the TDS. It is also an admitted fact that, the TDS along with interest on the delayed payment of TDS was deposited, even before the Show Cause Notice was issued. Prima facie, the very fact that, the payment has been made, though belated, would indicate that the Petitioners did not have the intention of not paying or avoiding payment of the TDS. I have also noted that, the payment of TDS though delayed, has been paid along with interest and most importantly before the Show Cause Notice was issued. I have also noted that, the proceedings have been initiated, after considerable lapse of time.
7) Perusal of the Circular dated 24 th April 2008 bearing Circular F.No.285/90/2008-IT(Inv.-I)/05 would indicate that, clause '3.1' provides for categories of offences that shall be processed for launching prosecution.
Clause 3.1 (i) refers to offences under Section 276B in respect of failure to pay taxes deducted at source to the credit of Central Government. It is provided that, in cases, where the amount of tax deducted is Rs. 25,000/- or more and the same is not deposited even within 12 months from the date of deduction, the same shall be processed for the prosecution in addition to the recovery 7/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc steps as may be necessary in such cases. It is further provided that, the Authority for processing the prosecution shall be the officer having jurisdiction over the TDS cases. It is further provided that, the prosecution shall preferably be launched within 60 days of such detection. If the default is detected during the search or survey, the processing ADIT/DDIT or the authorized officer shall inform the assessing officer having jurisdiction over TDS. I have noted that, the said circular, itself distinguishes and differentiate cases which may be processed for prosecution. To my mind, the distinction and differentiation is on the quantity of the amount and the period for which the TDS is not deposited. The circular provides that, cases shall be processed for launching prosecution where the amount of tax deducted is Rs. 25,000/- or more and when the same is not deposited even within 12 months from the date of the deduction. Only such cases, where both conditions are fulfilled are processed for prosecution. As per the circular, the prosecution under Section 276B of the Income Tax Act, shall not be proposed when the amount involved or the period of default is not substantial and the amount in default has been deposited to the credit of the Central Government. Section 276B deals with a situation when there is failure to pay tax to the Central Government. Section 278AA of the Income Tax Act clearly provides for cases where the punishment is not to be imposed. Section 278AA begins with a non obstante clause and clearly states that, no person for a failure under Section 276B of the Income Tax Act, shall be punished, if the person proves that there was "reasonable 8/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc cause" for such failure. A conjoint reading of Section 276B, 278AA and the CBDT Circular dated 24th April 2008 would make it clear that, the intention/mens rea of person is one of the paramount and relevant factors to be considered along with the quantum of the unpaid TDS amount and the period of non-payment. Further, it is also evident that, the said provisions are applicable in case of intentional neglect or default or an avoidance of payment.
8) A useful reference may also be made to certain judgments where it has been categorically held that, the provisions of Section 276B would not be attracted when the TDS liability has been paid and discharged in full and that prosecution is to be launched against the principal officer after complying with provisions of the Income Tax Act.
8.1) In the case of Bee Gee Motors and Tractors And Anr. Vs. Income- Tax Officer [1995] 82 Taxman 493 (Punjab & Haryana) held that:-
"5. Before any comments on the merits of the points canvassed by learned counsel for the petitioners are made, it shall be useful to see the relevant instructions. The same read thus:
"The prosecution under Section 276B should not normally be proposed when the amount involved and/or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of the Government. No such consideration will, of course, apply to levy of interest under Section 201(1A).""
8.2) In the case of Sonali Autos Pvt. Ltd. Vs. State of Bihar and Ors. [2017] 84 taxmann.com 286 (Patna) held that:-
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SPG / SAGAR WP-5088-2025.doc "22. Copy of the instructions bearing F. No.255/339/79- IT (Inv.) dated 28.05.1980 issued by the CBDT has been annexed by the petitioner as Annexure-1 to the reply to the Counter Affidavit, wherein, it is mentioned in clause (g) that prosecution under Section 276 B of the Act should not normally be proposed when the amount involved and/or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of the government. No such consideration will, of course, apply to levy of interest under Section 201 (1A) of the Act.
23. In the instant case, admittedly, the petitioner has deposited the amount of ₹1,43,029/- along with interest of 23,595/- on various dates in the year 2010. Allegation against the petitioner is that the petitioner did not deposit amount of ₹1,43,029/- duly deducted at source for the financial year 2009-10 within specified time with the Central Government, but the aforesaid amount has been deposited by the petitioner along with interest on various dates in the year 2010 when the mistake was noticed by the petitioner at the time of audit of Books of Accounts in 2010. Prosecution has been launched against the petitioner after the lapse of three years on 14.05.2013 as a consequence of sanction order passed under Section 279 (1) of the Act (Annexure-3) on 31.03.2013, in contravention of the instructions bearing F. No.255/339/79-IT (Inv.) dated 28.05.1980 issued by the CBDT in this regard."
8.3) In the case of M/s. Dev Multicom Private Ltd. Vs. State of Jharkand [2022] 138 taxmann.com 538 (Jharkhand) observed that:-
"17. It is an admitted fact that the TDS amount in all these cases were deposited with interest and the chart with respect to the same is also annexed with the counter affidavit of the Income Tax Department, wherein the date of deduction and date of depositing the said amount has been mentioned. However, some delay occurred in depositing the TDS. Apart from one or two cases, the deducted amount are not more than 50,000/-. While passing the sanction under Section 279(1) of the Act, the sanctioning authority has not considered the CBDT instructions, bearing F. No. 255/339/79-IT (Inv.) dated 28.05.1980, issued in this regard by the CBDT. The CBDT guidelines was considered 10/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc by the Patna High Court in the case of Sonali Autos (P) Ltd. (Supra) and after considering this guidelines, the Court has interfered with the matter and quashed the entire criminal proceedings. In CBDT instructions, it is mentioned that prosecution under Section 276(B) of the Act shall not normally be proposed when the amount involved and / or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of Government. No such consideration will, of course, apply to levy of interest under Section 201(1A) of the Act. This is quoted in the case of Sonali Autos (P) Ltd. (Supra). Moreover after receiving the deducted amount with interest, the prosecution has been launched against the petitioners, which is not in accordance with law. If the petitioners failed to deposit the amount in question within the stipulated time, i.e. by the 7th day of the subsequent month, it was required to launch the prosecution immediately, which has not been done in the cases in hand. Moreover Section 278(AA) of the Act clearly states that no person for any failure referred to under Section 276(B)of the Act shall be punished under the said provisions, if he proves that there was reasonable cause for such failure. The judgment relied by Ms Amrita Sinha, the CBDT guidelines were not considered. On this ground these cases are distinguishable in view of the facts and circumstances of the cases relied upon by Ms. Amrita Sinha.
18. The amount has already been deposited with interest and there is no reason why the criminal proceeding shall proceed and the criminal proceeding was launched after receiving the said amount with interest, had it been a case that the case was immediately instituted and thereafter the TDS amount has been deposited with interest, the matter would have been different. As such the continuation of the proceedings will amount to an abuse of the process of the Court."
8.4) In the case of Hemant Mahipatray Shah v. Anand Upadhyay reported in [2024] 165 taxmann.com 605 (Bombay) held that:-
"36. Turning to the definition of "principal officer" as contemplated in section 2(35) of the Income-tax Act which requires the Assessing Officer to issue notice to any person connected with the management or administration of the company for his intention of treating him as the 11/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc "principal officer" thereof. The obligation, however, does not end with merely a notice. Section 201(1), proviso to section 201(1) and 201(3) of the Income- tax Act make it mandatory for the Assessing Officer to pass an order. The order is also appealable under section 246(1)(i) of the Income-tax Act. The order would:
(a) Determine which officer is proposed to be dealt as "principal officer" of the company;
(b) Determine in the light of the exclusion under the proviso to section 201(1), whether the company and its principal officer should be "deemed to be assessee-in-default".
38. It can, thus, be seen that mere issuance of notice would not ipso facto become a final "determination" of classification and identification of a person as "principal officer". Since treating a person as such would not only have civil but also penal consequences. As such, an order making such determination is necessary. The said "adjudication" is contemplated under section 201 when such person (other than a company) is held to be a principal officer and is also thereafter deemed to be an assessee-in-default. Any person aggrieved by such order would have remedies available under section 246(1)(i) of the Income-tax Act. There is one more significant aspect to be noted which is the term "principal officer" has been used "singular" and not in "plural" and the word "officer" is further premised by the word "principal" which signifies "main" officer and not all the officers who may someway be connected with the management or administration of the company. The said "determination" can, therefore, be done only while passing an order under section 201(1) of the Income-tax Act. Section 204(iii) of the Income-tax Act also defines and fixes the responsibility for paying tax in relation to the company on its "principal officer".
40. Since the provision is squarely for prosecuting an offender, the term 'conduct of business of the Company" must have a nexus with "the offence committed" and hence, in the context of such offence under section 276B ought to be interpreted (which is in relation to "failure to pay" the TDS deducted) to be the "Principal Officer" who has been made responsible, under Section 204 (iii) of the I.T Act, for paying the tax. Proviso to Section 278B (1) prescribes 'absence of knowledge' as a valid defence for invoking the said section. Where a person is declared a 12/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc principal officer of a company by an "order" under section 201 (1), it would, prima facie, fulfill the requirement of presumption of knowledge. The term "Director" which has been separately defined under section 2 (20) of the I.T Act has not been used in Section 278B (1). As such director is not covered thereunder.
41. Turning to sub-section (2) of Section 278B of the I.T Act which commences with non obstante clause "provides an action to prosecute a person which expressly applies to a Director. Emphasis is on the words "with the consent", "connivance" or "attributable to the neglect" of such Director, Manager, Secretary or other office of the company. The offence in the present case being an offence under Section 276B of the I.T Act would, therefore, imply that the "failure to pay" the TDS deducted, must have direct relation namely consent, connivance or neglect of such person.
43. It is needless to reiterate the ratio laid down by the Supreme Court in the case of Dayle De'Souza (supra) since it is incumbent upon the Revenue to prove that the offence in question has been committed with the consent or connivance or is attributable to any neglect on the part of, any Director, Manager, Secretary or other officer of the company, such Director, Manager, Secretary or other officer of the Company shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. This is also in pari materia with the vicarious liability under section 141 of the Negotiable Instruments Act, 1881, as has been observed in paragraph 12 (supra).
[Emphasis supplied]
44. In the present case, the Revenue has chosen not to invoke the provisions of Section 221 r/w Section 201 (1) of the I.T Act to impose penalty against the company or the principal officer of the company for "failure to pay the whole or any part of tax, as required by or under this Act". The Revenue cannot now be permitted to prosecute the petitioners for the same substantive act which is also categorized as an "offence" under Section 276B of the I.T. Act. As such, further trial of the petitioners by the criminal Court cannot be permissible which would tantamount to abuse of process of the Court. The Counsel has, therefore, rightly placed reliance on a decision in the case of K.C. 13/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc Builders v. Assistant Commissioner of Income-Tax [2004] 135 Taxman 461/265 ITR 562 (SC). It would be apposite to extract relevant paragraph which reads thus;
"14........One of the amendments made to the above-mentioned provisions is the omission of the word "deliberately" from the expression "deliberately furnished inaccurate particulars of such income". It is implicit in the word "concealed" that there has been a deliberate act on the part of the assessee. The meaning of the word "concealment" as found in Shorter Oxford English Dictionary, 3rd Edition, Vol. I, is as follows:-
"In law, the intentional suppression of truth or fact known, to the injury or prejudice of another."
The word "concealment" inherently carries with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1) (iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled as in the instant case ordered by the Tribunal and later cancellation of penalty by the authorities".
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24. In the instant case, the penalties levied under Section 271(1)(c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in I.T As Nos. 3129-3132. It is settled law that levy of penalties and prosecution under Section 276-C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276- C is automatic.
25. In our opinion, the appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustained in the eye of law because the entire prosecution in view of a conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under Section 254 of the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer under Section 143(3) more so when the Assessing Officer cancelled the penalty levied.
26. In our view, once the finding of concealment and subsequent levy of penalties under Section 271(1) (c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the Tribunal. As already noticed, the subject -matter of the complaint before this Court is concealment of income arrived at on the basis of the finding of the Assessing Officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eyes of the law and, therefore, the prosecution cannot be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income Tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration. In our view, the High Court has taken the view that the charges have been framed and the matter is in the stage of further cross- examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned Magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent 15/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as a defence document inasmuch as the passing of the order as aforementioned is unsustainable and unquestionable".
The ratio laid down in the aforesaid decision is squarely applicable to the present set of facts.
8.5) In the case of Pinakin Kantilal Patel Vs. Dy. Comm. Of Income Tax and Anr. [2025] 177 taxmann.com 364 (Bombay) held that:-
"11. Learned counsel for the applicant is also justified relying upon the decision of the Hon'ble Supreme Court in the case of Sunita Palita (supra), wherein, although in connection with the proceedings under Section 138 of the Negotiable Instruments Act 1981, the ingredients required for satisfaction of Section 278B (2) of the Income Tax Act and Section 138/141 of the Negotiable Instruments Act are identical. The Hon'ble Supreme Court observed that there has to be a specific averment in the pleadings to substantiate involvement in the day to day affairs of the company or running of the business, and a mere statement that all directors are in-charge and responsible for conduct of the business of the company without anything more would not satisfy the ingredients for filing a complaint against the directors. In my view, the facts of the present case are similar to the facts before the Hon'ble Supreme Court and therefore, the said decision squarely applies to the facts of the present case.
12. I do not agree with the contention of the learned counsel for the Respondents that provisions of Section 278 B (2) of the IT Act are applicable in the facts of the present case. Section 278 B (2) of the IT Act provides that where an offence has been committed by a Company and it is proved that offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager or Secretary or any Officer then such Director, Manager, Secretary or Officer shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly. In my view there are no pleadings in the complaint that ingredients of Section 278 B (2) of IT 16/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc Act are attracted. As observed by the Supreme Court in the case of Sunita Palita (supra) there has to be a specific allegation and in the facts of the present case the same are lacking."
9) In the present case, after considering the conduct of the Petitioners in payment of the entire amount and interest before the Show Cause Notice being issued, this court is of the opinion that, the require ingredient to make out an offence under Section 276B of the Income Tax Act, would not be satisfied. I note that, it is not the case that, there is total failure to pay the TDS to the credit of the Central Government. An unintentional, bona fide delay which may occur due to the inadvertence of an employee cannot and ought not to be treated as an intentional evasion of tax. The difference and distinction between inadvertent non-payment and intentional avoidance and/or evasion of pay TDS, has been clearly made out in the Act and the circular.
10) Circular dated 24th April 2008, deals with streamlining of the procedure for identification and processing of the case of prosecution clearly indicate that, where the tax has been deposited a criminal prosecution need not be launched. In the present case the entire amount of TDS along with the penalty/interest has been deposited before the Show Cause Notice was issued. It would also be relevant to note that, Circular dated 24 th April 2008 prescribes that the prosecution be launched preferably within 60 days of detection of the default. In the present case the Show Cause Notice was issued after 40 months of the deposit of the delayed TDS and the interest. It would 17/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc also be pertaining to note that, the Petitioner had given an explanation for the reason for the delay in payment of the TDS. The said explanation has been termed as not being a reasonable cause and has been rejected as an afterthought and being unsupported by contemporaneous evidence. The explanation provided by the Petitioner is that, the non-payment of the TDS has been due to the inadvertent lapse on behalf of the erstwhile employee of the Petitioner. In my opinion, the said explanation appears to be a reasonable cause and a explanation of a prudent person with bona-fide intention. The explanation coupled with the fact that, TDS and the interest has been paid before show cause notice was issued, prima facie indicate that, there was no intention of avoiding payment of TDS or evading the payment of TDS and that the explanation can be safely termed as a "reasonable cause".
11) A conjoint reading of Section 276B of the Income Tax Act and the CBDT Circular would make it clear that, the intention of the legislature is to prosecute intentional non-payment of TDS where the amount and period of non-payment, both are significant. As mentioned earlier, the Clause 3.1 CBDT Circular dated 24th April 2008 provides for prosecution to be launched in cases where the amount of TDS in default is Rs. 25,000/- or more and the delay in deposit from the date of deduction exceeds to 12 months. In the present case, TDS was due for financial year 2012-2013 which was deposited by the Petitioners within a period of 12 months from the respective dates of deductions except on two occasions where, the delay was 12 months and 17 18/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc months but the amount of TDS deducted was Rs.2294/- and Rs.1152/- respectively, which is substantially below the limit of Rs. 25,000/- as prescribed by the CBDT Circular.
12) One more aspect which requires consideration is that, the Respondent Authorities have failed to substantiate the alleged or specific roles of the Petitioners in commission of offence under Section 276B to make them liable under Section 278B. In this regard, it would be necessary to refer to the fact that, no notice was issued by the Assessing Officer to any of the Petitioners under Section 2(35) (b) of the Income Tax Act treating any of the Petitioners as principal officer. There is no Order passed under the Income Tax Act, treating Petitioners as a Principal Officer.
13) It is settled law that, the inherent power under Section 482 of the Code of Criminal Procedure ought to be exercise to prevent the abuse of the process of any court or otherwise secure the ends of justice. The power of the High Court under Section 482 of the Code of Criminal Procedure are wide and the very platitude of the power required a great caution in its exercise. In exercising the power under Section 482 the Court must ensure that the legitimate prosecution is not stifled and at the same time untenable prosecution should not be allowed to continue. What is required to seen is whether any prima facie case is made out or not. While exercising the inherent power under Section 482 of the Code of Criminal Procedure the court has to apply its judicial discretion judiciously and is require to take due 19/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 ::: SPG / SAGAR WP-5088-2025.doc care and caution be circumspect in exercising the discretion and at the same time ensure that all material and relevant facts and circumstances of the matter are properly considered in their correct perspective.
14) Considering the entire facts of the present case, the pronouncement of the Hon'ble Supreme Court and more particularly the provisions of the Income Tax Act, and Circular dated 24 th April 2008, I am of the opinion that the prosecution launched against the Petitioners cannot be sustained in view of the fact that the entire TDS amount along with interest has been paid. The prior payment along with interest and subsequent issuance of the Show Cause Notice issued and criminal prosecution launched subsequently would be valid grounds for this Court to invoke the inherent jurisdiction under Section 482 of the Code of Criminal Procedure to quash the criminal proceedings in the interest of justice and to prevent the abuse of the process of law.
15) In view of the aforesaid facts and circumstances, I passed the following order:-
i) The Petition is allowed in terms of prayer clauses (a), (b) and (c).
ii) The Interim Application does not survive and is therefore disposed of.
(RANJITSINHA RAJA BHONSALE, J.) 20/20 ::: Uploaded on - 25/05/2026 ::: Downloaded on - 29/05/2026 22:01:48 :::